TREASURIES-Prices gain as Cohn resignation adds to trade war fears

Reuters Staff

4 Min Read

* Cohn resignation intensifies trade war fears
* ADP shows 235,000 jobs added in February
* Fed's Brainard more hawkish on the economy
By Karen Brettell
NEW YORK, March 7 (Reuters) - Treasury prices climbed on
Wednesday on safety buying after the resignation of Gary Cohn,
the top economic advisor to U.S. President Donald Trump, fanned
fears that Trump will proceed with protectionist tariffs and
risk a global trade war.
Cohn’s resignation on Tuesday came after he lost a fight
over Trump's plans to impose hefty steel and aluminum import
tariffs.
“The concern is that there could be trade wars, and secondly
that Gary Cohn is a big player over the last year in his
economic decisions,” said Justin Lederer, an interest rate
strategist at Cantor Fitzgerald in New York. “It’s a little more
uncertainty.”
Bonds were also supported by data showing that the U.S.
trade deficit increased to a more than nine-year high in
January, with the shortfall with China widening sharply.
Bonds pared price gains, however, after other data from
payrolls processor Automatic Data Processing (ADP) showed that
employers added 235,000 jobs in February, more than expected.
Benchmark 10-year notes were last up 5/32 in
price to yield 2.86 percent, down from 2.88 percent on Tuesday.
Stronger economic data and higher inflation readings are
raising expectations that the Federal Reserve will hike interest
rates four times this year, more than the three increases that
were previously expected.
Fed Governor Lael Brainard adopted a more hawkish tone in a
speech on Tuesday, noting economic "headwinds are shifting to
tailwinds" given the "substantial" boost from tax cuts and
government spending, and synchronized global growth.
The comments back testimony from Fed Chairman Jerome Powell
last week that the economy had strengthened recently, a remark
that prompted investors to increase bets on four rate increases
in 2018.
Friday’s employment report for February will be evaluated
for any new indications of rising wages.
U.S. job growth surged in January and wages rose further,
recording their largest annual gain in more than 8-1/2 years,
bolstering expectations that inflation will push higher this
year as the labor market hits full employment.
Price
US T BONDS JUN8 143-17/32 0-5/32
10YR TNotes JUN8 120-52/256 0-44/256
Price Current Net
Yield % Change
(bps)
Three-month bills 1.65 1.6799 -0.002
Six-month bills 1.83 1.8727 -0.002
Two-year note 100-4/256 2.2418 -0.004
Three-year note 99-144/256 2.4047 -0.002
Five-year note 99-252/256 2.6283 -0.017
Seven-year note 99-196/256 2.7871 -0.020
10-year note 99-16/256 2.8589 -0.018
30-year bond 97-116/256 3.1316 -0.004
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 28.00 0.50
spread
U.S. 3-year dollar swap 23.50 0.75
spread
U.S. 5-year dollar swap 11.75 0.75
spread
U.S. 10-year dollar swap 2.00 0.50
spread
U.S. 30-year dollar swap -17.75 0.25
spread
(Editing by Bernadette Baum)